Sarawak and Sabah still on tract for MASwings takeover

THE state governments of Sarawak and Sabah are still in discussions with the federal government to buy a stake in MASwings, a wholly-owned subsidiary of Malaysia Airlines (MAS).

Both Sarawak Tourism Minister Datuk Amar Abang Johari Tun Openg and Sabah Tourism, Culture and Environment Minister Datuk Masidi Manjun have said that the talks are still preliminary and nothing has been finalised, including the size of the stake to be acquired.

The governments of the two East Malaysian states have been working to takeover MASwings ever since MAS ceased Firefly’s services to the two states.

This was due to the aviation industry’s (ir)rationalisation exercise — the share swap between MAS and AirAsia.

The exercise has had devastating effects on both East Malaysian states, not only on the tourism industry, but also on ordinary travellers who have been left with less options when it comes to flights to Kuala Lumpur.

Although Firefly had very high load factors for all its flights to Sarawak and Sabah – yes they were full most of the time — it was no longer allowed to continue serving the people of East Malaysia.

The airline was giving AirAsia a good run for its money and probably meant that AirAsia’s load factor was not as high during that period, but hey that’s water under the bridge now.

Both state governments have lobbied the Federal Government to acquire MASwings.

With its existing network, which presently covers 42 routes with 22 destinations in East Malaysia, MASwings has been seen as the most suitable replacement for Firefly.

MASwings operates a fleet of 10 ATR 72-500s.

The airline carried 1.27 million passengers in 2010, a 36 per cent increase over 2009.

Its seat factor rose to 60 per cent from 53 per cent during that period.

To read more about efforts by the two East Malaysian states to takeover MASwings go here.

A report from The Sun:

MASwings takeover talks still on

KANG SIEW LI

PETALING JAYA: The Sabah and Sarawak state governments are still in discussion with the federal government to buy a stake in MASwings Sdn Bhd, a wholly-owned subsidiary of Malaysian Airline System Bhd (MAS), despite talk that the deal has been concluded.

“The talks are still preliminary and nothing has been finalised, including the size of the stake to be acquired,” Sabah Tourism, Culture and Environment Minister Datuk Masidi Manjun told SunBiz yesterday, in response to talk that the two state governments have already struck a deal to take over the airline under joint ownership with the federal government.

Sarawak Tourism Minister Datuk Amar Abang Johari Openg also said it was too early to comment.

When contacted, MAS’ management denied involvement in the negotiations.

“This was not in the Business Plan (unveiled last December) and hence is a surprise. Our main shareholder Khazanah Nasional Bhd may have the answers, as this is not in the Business Plan,” a MAS spokesman said via email.

A Khazanah spokesman said, however, the matter came under the purview of MAS, being the parent company of MASwings.

Apart from a golden share, the federal government via its investment arm Khazanah, currently holds a 49% stake in MAS. The Employees Provident Fund owns another 9%.

There’s been speculation on MASwings’ future since last year when MAS ceased Firefly’s jet services from Kuala Lumpur to Kota Kinabalu and Kuching as part of a wider network rationalisation. Sources had told theSun then that the decision to end the Firefly service was taken poorly by the people in Sabah and Sarawak, prompting both state governments to lobby Prime Minister Datuk Seri Najib Razak to acquire MASwings.

MASwings was identified by the Sabah and Sarawak governments as the most suitable replacement for Firefly’s jet services due to its existing network which presently covers 42 routes with 22 destinations in the two states.

Last November, theSun reported Abang Johari as saying that the state may become a major shareholder of MASwings. He had said if all goes according to plan, MASwings will start operating as a regional airline by the middle of this year.

In February, Abang Johari had said the prime minister had endorsed Sabah and Sarawak’s suggestion that MASwings be made a regional operator instead of operating only rural air services in the two states.

While it makes sense for the Sabah and Sarawak state governments to take a stake in MASwings, aviation analysts said a less than controlling stake would be “meaningless as it would only mean putting more money into the current MAS structure which is struggling to turn itself around”.

“The government is already subsidising MASwings some RM150 million a year to operate the Rural Air Services (RAS) in Sabah and Sarawak, so what’s the difference if the Sabah and Sarawak governments were to just hold a less than controlling stake in MASwings?

“Thus, the underlying principle of a joint-ownership agreement should be for the federal government to hold up to 49% in MASwings, while the Sabah and Sarawak governments hold a 51% stake. They must also separate the management of MASwings from MAS and allow the Sabah and Sarawak governments to grow MASwings themselves,” said an analyst.

MASwings operates a fleet of 10 ATR 72-500s. It carried 1.27 million passengers in 2010, a 36% increase over 2009. Its seat factor rose to 60% from 53% despite the increase in capacity during the period under review.